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Reliance Industries spins off O2C business

January 26/2021

MOSCOW (MRC) -- Reliance Industries Ltd has completed spin-off of the firm�s oil-to-chemical business into a new unit that will help it pursue growth opportunities with strategic partnerships, reported Kemicalinfo with reference to the company"s statement.

The oil-to-chemical (O2C) business unit holds Reliance�s oil refinery and petrochemical assets and retail fuel business but not upstream oil and gas producing fields such as KG-D6 and textiles business.

�Reorganising refining and petrochemicals as oil-to-chemicals (O2C) reflects new strategy as well as management matrix,� the company said in a post earning investor presentation.

Reliance started work on hiving off the O2C business into a separate unit last year for a possible stake sale to companies such as Saudi Aramco.

It values the O2C business at USD75 billion and has been in talks with Saudi Arabian Oil Co (Aramco) for sale of a 20% interest.

The company, however, did not mention discussions with Aramco, which are said to have hit a valuation roadblock.
The reorganisation would �drive the move towards further downstream and closer to customers� and �provide sustainable and affordable energy and materials solutions to meet India�s growing needs,� the firm said in the presentation.

Reliance O2C Limited houses oil refining and petrochemical plants and manufacturing assets, bulk and wholesale fuel marketing, and Reliance�s 51% interest in retail fuel joint venture with BP of the UK.

The O2C unit also houses the firm�s Singapore and the UK-based oil trading subsidiaries and marketing subsidiary, Reliance Industries Uruguay Petroquimica SA.
It also houses Reliance Ethane Pipeline Limited that operates a pipeline between Dahej in Gujarat and Nagothane in Maharashtra as well as 74.9% stake that Reliance holds in the joint venture with Sibur.

Its very large ethane carriers, gas pipelines such as one that transports coal-bed methane from its CBM blocks, overseas oil and gas asset holding company Reliance Industries (Middle East) DMCC, and domestic exploration and production assets would not form part of the O2C unit.

Ambani had in July 2019 stated that the process of spinning of O2C into a separate subsidiary would be completed by early 2021.
Reliance owns and operates twin oil refineries at Jamnagar in Gujarat, with a combined capacity of 68.2 million tonnes per annum.

The company holds a 66.6% stake in the KG-D6 block where it is investing about USD5 billion in developing a second set of gas discoveries along with BP. It also has a similar stake in the NEC-25 block in the Bay of Bengal and operates two CBM blocks in Madhya Pradesh. These upstream assets are not part of the O2C unit.

�Reliance O2C (is) one of the most integrated manufacturers of value-added fuels, chemicals and materials,� the presentation said. �O2C to maximize downstream, reduce transportation fuels and create clean and green energy platforms.

Reliance for the first time reported integrated earnings of the O2C business in its third quarter financial results. Previously, refining and petrochemical businesses were reported separately while fuel retailing revenue was part of the firm�s overall retail business.

In the October-December 2020 earnings statement, refining and petrochemical as well as fuel retailing businesses earnings were reported as one. As a result, it did not give refining margins � the most sought after number to assess the firm�s oil refining business.

The company�s EBIDTA grew 10.35% to Rs 9,756 crores (USD1.33 billion) for the period ended December 31, 2020 as against EBIDTA of Rs 8,841 crores (USD1.2 billion) for the previous quarter.

Net sales saw an increase of 10.05% to Rs 83,838 crores (USD11.49 biilion) for the period ended December 31, 2020 as against net sales of Rs 76,184 crores (USD10.44 biilion) during the previous quarter.

As MRC informed earlier, in September 2020, RIL released a detailed plan to carve out its oil-to-chemicals business into a separate entity for a potential stake sale. As per the scheme, RIL�s O2C assets, including its refining, petrochemicals, fuel retail (majority interest only) and bulk wholesale marketing businesses, along with its assets and liabilities, will be transferred to a new unit. The new unit will include the refining and petrochemical plants and manufacturing assets at RIL�s Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hosiarpur locations.

It will also include all assets relating to RIL�s ongoing refinery and petrochemical projects that are being commissioned or near completion, the company said. RIL had officially announced its proposal to transfer its oil-to-chemicals (O2C) business to a separate entity in April.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC"s DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Reliance Industries is one of the world"s largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Sibur Holding, BP Plc, Reliance Industries, UK, India, Russia.
Category:General News
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